"P400B to exit from SDA – ING" An estimated P400 billion of asset funds will exit the central bank’s special deposit account (SDA) facility by the end of this month which is the deadline for banks to reduce their trust units’ money in SDA by 30 percent, an ING Bank economist said. By the end of November when the Bangko Sentral ng Pilipinas (BSP) fully implements the limit on trust departments’ access to the SDA facility, another P1 trillion is expected to shift from the BSP’s open market operations to banks’ unit investment trust funds (UITF). Under pooled funds, the BSP is allowing only unit UITF as SDA-allowed trust accounts. In a statement, ING Bank economist Joey Cuyegkeng said they expect about P400 billion will shift from SDA to the local equity and bond markets which should help boost market confidence after the recent global market volatility following the US Federal Reserve’s announcement of ending its bond-buying program. The SDA volume as of end-June totaled P1.738 trillion and Cuyegkeng in his commentary “Views and Cues” said a “large portion” is “being invested in banks’ money-market of short-term UITFs and banks’ deposits.” By the end of this year when the next deadline on SDA restrictions is set, Cuyegkeng said another P1 trillion will shift to trust funds. “Like this first migration, a large portion of the P1-trillion SDA would end up in banks’ UITFs with a bias for money-market or short-term UITFs and deposit products,” he said. Cuyegkeng warned though that releasing SDA funds into the system will spike domestic liquidity growth which he expects will increase by 20 percent at least in the next 12 months. The fund migration would “bring about higher inflation expectations for late 2014 and for 2015,” he added. As for its impact on the exchange rate, Cuyegkeng is still uncertain since the “freed-up SDA funds could also spur overall economic growth that could attract investors and strengthen the peso,” said the statement. “(In the near term) higher liquidity is likely to keep interest rates at modest levels. Higher inflation and interest rates in 2015 are risks,” he said. mb.ph/Business/Banking_&_Finance/23337/P400B_to_exit_from_SDA_%E2%80%93_ING#.UexaSo03CSo
Posted on: Sun, 21 Jul 2013 22:04:10 +0000
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